U. S. SECURITIES AND EXCHANGE COMMISSION
                       Washington, D. C. 20549
                              FORM 10-QSB
(Mark One)

[X]        QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

            For the quarterly period ended June 30, 1997

[ ]        TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

      For the transition period from____________to____________


                   Commission File Number: 0-12231

                       BAY COMMERCIAL SERVICES
  (Exact name of small business issuer as specified in its charter)

      California                                         94-2760444
(State or other jurisdiction of                        (I.R.S.Employer
incorporation or organization)                       Identification No.)

                        1495 East 14th Street
                    San Leandro, California 94577
              (Address of principal executive offices)

                           (510) 357-2265
                     (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

YES    X          NO _____

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

Class                                        Outstanding at July 31, 1997

Common stock, no par value                               1,076,720 shares


Transitional Small Business Disclosure Format

YES              NO __X_


This report contains a total of 17 pages.
<PAGE>
<TABLE>

                                        BAY COMMERCIAL SERVICES AND SUBSIDIARY
                                      Consolidated Condensed Balance Sheets
<CAPTION>
                                                                             June 30,
                                                                                1997  December 31,
(Dollars in thousands):                                                   (unaudited)        1996
--------------------------------------------------------------------------------------------------
<S>
ASSETS
                                                                            <C>           <C>
Cash and due from banks                                                     $  8,295      $ 6,945
Federal funds sold                                                             1,500            0
--------------------------------------------------------------------------------------------------
  Cash and cash equivalents                                                    9,795        6,945
--------------------------------------------------------------------------------------------------

Investment securities available for sale, stated at market value
  (amortized cost of $16,526 for 1997; $9,364 for 1996)                       16,473        9,339
Investment securities held to maturity (market values of $6,800 for 1997;
   $6,743 for 1996)                                                            6,749        6,704
--------------------------------------------------------------------------------------------------
  Total investment securities                                                 23,222       16,043
--------------------------------------------------------------------------------------------------
Loans held for sale                                                            1,284        2,923
Loans held for investment                                                     70,190       68,439
  Allowance for loan losses                                                   (1,000)        (971)
--------------------------------------------------------------------------------------------------
  Net loans                                                                   70,474       70,391
--------------------------------------------------------------------------------------------------
Premises and equipment, net                                                    2,196        2,164
Interest and fees receivable                                                     564          585
Other assets                                                                     571          641
-------------------------------------------------------------------------------------------------

  Total assets                                                              $106,822      $96,769
=================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
  Noninterest-bearing demand                                                $ 29,337      $26,198
  Savings and interest-bearing demand                                         23,959       23,250
  Time                                                                        31,714       27,823
  Certificates of deposit, $100,000 and over                                   9,261        6,020
--------------------------------------------------------------------------------------------------
  Total deposits                                                              94,271       83,291
--------------------------------------------------------------------------------------------------

Securities sold under agreements to repurchase                                 1,730        2,304
Federal funds purchased                                                            0          500
Interest payable and other liabilities                                           895        1,256
--------------------------------------------------------------------------------------------------
  Total liabilities                                                           96,896       87,351
--------------------------------------------------------------------------------------------------

Commitments and contingent liabilities                                             0            0

Shareholders' equity:
  Common stock - no par value: authorized 20,000,000
    shares; issued & outstanding 1,076,720 shares in 1997 and 1996             3,662        3,662
  Retained earnings                                                            6,296        5,771
  Net unrealized loss on securities available for sale                           (32)         (15)
--------------------------------------------------------------------------------------------------
  Total shareholders' equity                                                   9,926        9,418
--------------------------------------------------------------------------------------------------

  Total liabilities and shareholders' equity                                $106,822      $96,769
==================================================================================================
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
             Consolidated Condensed Statements of Income (unaudited)

<CAPTION>
                                                     Six Months Ended    Three Months Ended
                                                          June 30,              June 30,
(In thousands, except per share amounts):              1997      1996        1997      1996
-------------------------------------------------------------------------------------------
<S>
Interest income:
                                                     <C>       <C>         <C>       <C>
  Loans, including fees                              $3,526    $3,095      $1,795    $1,570
  Federal funds sold                                    140       115          92        80
  Investment securities:
    Taxable                                             413       509         216       247
    Nontaxable                                           92        76          47        40
--------------------------------------------------------------------------------------------
      Total interest income                           4,171     3,795       2,150     1,937
--------------------------------------------------------------------------------------------
Interest expense:
  Deposits:
    Savings and interest-bearing demand                 319       320         165       166
    Time                                                751       667         386       348
    Certificates of deposit, $100,000 and over          245       139         127        67
  Other borrowed funds                                   50        51          22        26
--------------------------------------------------------------------------------------------
      Total interest expense                          1,365     1,177         700       607
--------------------------------------------------------------------------------------------
      Net interest income                             2,806     2,618       1,450     1,330
Provision for loan losses                                47         0          47         0
--------------------------------------------------------------------------------------------
      Net interest income after
        provision for loan losses                     2,759     2,618       1,403     1,330
--------------------------------------------------------------------------------------------
Noninterest income:
  Service charges and fees                              133       125          65        60
  Bankcard income                                       145       120          79        63
  Loan servicing                                         62        65          27        29
  Gain on sale of loans                                  57       108          57        45
  Other                                                 192        74         167        33
--------------------------------------------------------------------------------------------
      Total noninterest income                          589       492         395       230
--------------------------------------------------------------------------------------------
Noninterest expenses:
  Salaries and employee benefits                      1,421     1,208         713       596
  Occupancy                                             347       297         173       151
  Data processing                                       155       144          78        70
  Bankcard processing expense                           117        91          65        47
  Professional services                                  69       104          33        57
  Other                                                 403       455         198       278
--------------------------------------------------------------------------------------------
      Total noninterest expenses                      2,512     2,299       1,260     1,199
--------------------------------------------------------------------------------------------
      Income before income tax expense                  836       811         538       361
Income tax expense                                      311       316         195       137
--------------------------------------------------------------------------------------------
      Net income                                     $  525    $  495      $  343    $  224
============================================================================================
      Net income per common and equivalent share     $ 0.42    $ 0.42      $ 0.27    $ 0.19
============================================================================================
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
                 Consolidated Condensed Statements of Cash Flows

<CAPTION>
                                                                 Six Months Ended
                                                                       June 30,
(In thousands):                                                    1997      1996
----------------------------------------------------------------------------------
<S>
Cash flows from operating activities:
                                                                <C>       <C>
   Net income                                                   $   525   $   495
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation and amortization                                115       157
       Provision for loan losses                                     47         0
       Unamortized deferred loan fees, net                          (75)     (112)
       Originations of SBA loans held for sale                     (191)     (611)
       Proceeds from the sale of SBA loans held for sale          1,095     1,742
       Change in interest and fees receivable and other assets      117       (82)
       Change in interest payable and other liabilities             (38)     (504)
----------------------------------------------------------------------------------
     Net cash provided by operating activities                    1,595     1,085
----------------------------------------------------------------------------------
Cash flows from investing activities:
   Proceeds from maturities of securities available for sale        113       635
   Proceeds from maturities of securities held to maturity        1,161     1,132
   Purchase of securities available for sale                     (8,246)        0
   Purchase of securities held to maturity                         (205)     (541)
   Net change in loans                                             (974)   (7,598)
   Purchases of premises and equipment                             (177)      (26)
----------------------------------------------------------------------------------
     Net cash used in investing activities                       (8,328)   (6,398)
----------------------------------------------------------------------------------
Cash flows from financing activities:
   Net change in deposits                                        10,980     6,217
   Net change in securities sold under agreements to repurchase    (574)       39
   Net change in federal funds purchased                           (500)        0
   Cash dividends paid                                             (323)     (323)
----------------------------------------------------------------------------------
     Net cash provided by financing activities                    9,583     5,933
----------------------------------------------------------------------------------
     Net change in cash and cash equivalents                      2,850       620
Cash and cash equivalents at beginning of period                  6,945    11,757
----------------------------------------------------------------------------------
Cash and cash equivalents at end of period                      $ 9,795   $12,377
==================================================================================
Supplemental  disclosure of cash flow  information:  Cash paid during the period
   for:
      Interest                                                  $ 1,445   $ 1,187
      Income taxes                                                  108       719

See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
        Notes to Consolidated Condensed Financial Statements (Unaudited)


1)   All adjustments  (consisting only of normal  recurring  accruals) which, in
     the opinion of  Management,  are necessary for a fair  presentation  of the
     Company's financial position at June 30, 1997 and December 31, 1996 and the
     results  of its  operations  and its cash flows for the three and six month
     periods  ended June 30,  1997 and 1996 have been  included.  The results of
     operations  and cash flows for the periods  presented  are not  necessarily
     indicative of the results for a full year.

2)   The  accompanying  unaudited  financial  statements have been prepared on a
     basis consistent with the accounting  principles and policies  reflected in
     the Company's annual report for the year ended December 31, 1996.

3)   Net  income  per share for the three and six month  periods  ended June 30,
     1997 and 1996 was computed by dividing  net income by the weighted  average
     number of shares of common stock outstanding during the periods,  including
     the dilutive  effects of stock options,  if material.  The weighted average
     number  of  common  and  equivalent  shares  outstanding  for the six month
     periods  ended  June  30,  1997  and  1996  was  1,251,507  and  1,181,690,
     respectively.  The weighted average number of common and equivalent  shares
     outstanding  for the  second  quarter  of 1997 and 1996 was  1,255,752  and
     1,155,642, respectively.

     In February 1997, The Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128).
     The Company is required to adopt SFAS 128 in the fourth quarter of 1997 and
     will restate at that time  earnings per share (EPS) data for prior  periods
     to conform with SFAS 128. Earlier application is not permitted.

     SFAS 128 replaces  current EPS reporting  requirements  and requires a dual
     presentation  of basic and diluted EPS. Basic EPS excludes  dilution and is
     computed by dividing  net income by the weighted  average  number of common
     shares  outstanding  for the period.  Diluted EPS  reflects  the  potential
     dilution that could occur if securities or other  contracts to issue common
     stock were exercised or converted into common stock.

     If SFAS 128 had been in effect  during the current and prior year  periods,
     basic EPS would have been $0.49 and $0.46 for the six month  periods  ended
     June 30, 1997 and 1996,  respectively.  Basic EPS for the second quarter of
     1997 and 1996 would have been $0.32 and $0.21,  respectively.  Diluted  EPS
     under  SFAS  128  would  not have  been  significantly  different  than EPS
     currently reported for the periods.

4)   The  provision  for income  taxes for the periods  presented  is based on a
     projected tax rate for the entire year.  The  Company's  effective tax rate
     was 37% and 39% for the six month  periods  ended  June 30,  1997 and 1996,
     respectively. The decrease in the tax rate was partially attributable to an
     increase in nontaxable municipal bond income in 1997 and a reduction of the
     California franchise tax rate to 10.84% in 1997 from 11.3% in 1996.

<PAGE>
<TABLE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY
                     The Table Below Illustrates Changes in
 Major Categories of the Average Balance Sheets and Statements of Income and in
                     Certain Performance Ratios (Unaudited)
<CAPTION>
                                           Six Months Ended         Increase
                                                 June 30,          (Decrease)
(Dollars in thousands):                       1997      1996        $       %
--------------------------------------------------------------------------------
<S>
Average Balances:
                                          <C>        <C>        <C>         <C>
  Assets *                                $101,518   $92,449    $ 9,069     9.9%
  Investment securities - taxable*          14,270    16,366     (2,096)  (12.8)
  Investment securities - nontaxable         3,453     3,102        351    11.3
  Federal funds sold                         4,303     4,563       (260)   (5.7)
  Total loans                               70,112    59,651     10,461    17.5
  Nonaccrual loans                             315       141        174   123.4
  Other real estate owned                        0       359       (359) (100.0)
  Deposits                                  88,855    80,226      8,629    10.8
  Shareholders' equity *                     9,690     8,971        719     8.0

  Interest-earning assets                   91,823    83,541      8,282     9.9
  Interest-bearing liabilities              64,382    58,045      6,337    10.9


Income Statements:
  Interest income (1)                     $  4,214   $ 3,830    $   384    10.0%
  Interest expense                           1,365     1,177        188    16.0
--------------------------------------------------------------------------------
    Net interest income (1)                  2,849     2,653        196     7.4
  Taxable equivalent adjustment                 43        35          8    22.9
--------------------------------------------------------------------------------
    Net interest income                      2,806     2,618        188     7.2
  Provision for loan losses                     47         0         47      NA
--------------------------------------------------------------------------------
    Net interest income after provision
      for loan losses                        2,759     2,618        141     5.4
--------------------------------------------------------------------------------
  Noninterest income                           589       492         97    19.7
  Noninterest expenses                       2,512     2,299        213     9.3
  Income tax expense                           311       316         (5)   (1.6)
--------------------------------------------------------------------------------
    Net income                            $    525   $   495    $    30     6.1%
================================================================================
<FN>
 * before unrealized gain or loss on securities available for sale
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S>
Performance Ratios: (2)                                         Change
                                             <C>       <C>       <C>
  Yield on average earning assets            9.16%     9.14%     0.02 %
  Yield on average earning assets (1)        9.25%     9.22%     0.03 %
  Interest rate on average interest-bearing
      liabilities                            4.28%     4.08%     0.20 %
  Interest expense as a percent of average
      earning assets                         3.00%     2.83%     0.17 %

  Net yield on average earning assets        6.16%     6.31%    (0.15)%
  Net yield on average earning assets (1)    6.25%     6.39%    (0.14)%
<FN>

(1)  Federal taxable  equivalent basis.
(2)  Ratios have been annualized and are not  necessarily  indicative of results
     for a full year.
</FN>
</TABLE>
<PAGE>
<TABLE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY

                     The Table Below Illustrates Changes in
 Major Categories of the Average Balance Sheets and Statements of Income and in
                     Certain Performance Ratios (Unaudited)
<CAPTION>
                                          Three Months Ended        Increase
                                                 June 30,          (Decrease)
(Dollars in thousands):                       1997      1996        $       %
--------------------------------------------------------------------------------
<S>
Average Balances:
                                          <C>        <C>        <C>         <C> 
  Assets *                                $103,506   $94,470    $ 9,036     9.6%
  Investment securities - taxable*          15,955    15,966        (11)   (0.1)
  Investment securities - nontaxable         3,480     3,228        252     7.8
  Federal funds sold                         4,744     6,381     (1,637)  (25.7)
  Total loans                               69,992    60,192      9,800    16.3
  Nonaccrual loans                             369       219        150    68.5
  Other real estate owned                        0       359       (359) (100.0)
  Deposits                                  90,951    82,272      8,679    10.5
  Shareholders' equity *                     9,818     9,101        717     7.9

  Interest-earning assets                   93,802    85,548      8,254     9.6
  Interest-bearing liabilities              65,492    59,925      5,567     9.3


Income Statements:
  Interest income (1)                        2,172   $ 1,955    $   217    11.1%
  Interest expense                             700       607         93    15.3
--------------------------------------------------------------------------------
    Net interest income (1)                  1,472     1,348        124     9.2
  Taxable equivalent adjustment                 22        18          4    22.2
--------------------------------------------------------------------------------
    Net interest income                      1,450     1,330        120     9.0
  Provision for loan losses                     47         0         47    NA
--------------------------------------------------------------------------------
   Net interest income after provision
    for loan losses                          1,403     1,330         73     5.5
--------------------------------------------------------------------------------
  Noninterest income                           395       230        165    71.7
  Noninterest expenses                       1,260     1,199         61     5.1
  Income tax expense                           195       137         58    42.3
--------------------------------------------------------------------------------
    Net income                            $    343   $   224    $   119    53.1%
================================================================================
<FN>
* before unrealized gain or loss on securities available for sale
</FN>
</TABLE>
<TABLE>
<CAPTION>
<S> 
Performance Ratios: (2)                                         Change
                                             <C>       <C>       <C>   
  Yield on average earning assets            9.19%     9.11%     0.08 %
  Yield on average earning assets (1)        9.29%     9.19%     0.10 %
  Interest rate on average interest-bearing
      liabilities                            4.29%     4.07%     0.22 %
  Interest expense as a percent of average
      earning assets                         2.99%     2.85%     0.14 %

  Net yield on average earning assets        6.20%     6.26%    (0.06)%
  Net yield on average earning assets (1)    6.30%     6.34%    (0.04)%


(1)  Federal taxable  equivalent basis.
(2)  Ratios have been annualized and are not  necessarily  indicative of results
     for a full year.
</TABLE>
<PAGE>

                     BAY COMMERCIAL SERVICES AND SUBSIDIARY

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

                   SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO
                         SIX MONTHS ENDED JUNE 30, 1996

OVERVIEW

Certain  matters  discussed  in this  Management's  Discussion  and Analysis are
forward-looking  statements  that are  subject to risks and  uncertainties  that
could cause  actual  results to differ  materially  from those  projected in the
forward-looking  statements. Such risks and uncertainties include, among others,
(1) significant  increases in competitive pressure in the banking industry;  (2)
changes in the interest rate  environment  affect margins;  (3) general economic
conditions,  either nationally or regionally,  are less favorable than expected,
resulting in, among other things, a deterioration in credit quality; (4) changes
in the regulatory environment; (5) changes in business conditions and inflation;
and (6) changes in securities markets.  Therefore,  the information set forth in
such  forward-looking  statements should be carefully considered when evaluating
the business  prospects of Bay Commercial  Services  Company (the "Company") and
Bay Bank of Commerce (the "Bank").

Net income of the Company was $525,000 for the first six months of 1997 compared
to $495,000 for the first six months of 1996. Net income per share was $0.42 for
both the 1997 and 1996 periods.

The $30,000 or 6%  increase  in net income for the 1997  period  compared to the
1996 period was  principally  due to a $188,000  or 7% increase in net  interest
income and a $97,000 or 20% increase in noninterest  income.  These increases in
income  were  partially  offset by a  $213,000  or 9%  increase  in  noninterest
expenses and a $47,000 provision for loan losses in the 1997 period.

Total assets were  $106,822,000 at June 30, 1997,  representing a $10,053,000 or
10% increase over December 31, 1996.  Total  deposits  grew  $10,980,000  or 13%
during the period; nearly half related to deposit growth at the newest branch of
the Bank in San Ramon.  Due to flat loan  growth  during the first six months of
1997, the funds  contributed by the deposit growth were principally  invested in
investment securities and federal funds sold.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest  income,  the principal  source of the Company's  earnings,  is the
amount by which interest and fees generated by  interest-earning  assets,  loans
and investments, exceed the interest cost of deposits and other interest-bearing
liabilities.  Net  interest  income is affected by changes in interest  rates as
well  as  the   composition   and   volume  of   interest-earning   assets   and
interest-bearing liabilities.
<PAGE>

Net interest  income of  $2,806,000  for the first six months of 1997  increased
$188,000  or 7%  compared  to  the  first  six  months  of  1996.  The  increase
principally reflected an $8,282,000 or 10% growth in average earning assets. The
net interest margin  declined  slightly to 6.16% for the 1997 period compared to
6.31% for the 1996 period.

The growth in average  interest-earning assets between the 1997 and 1996 periods
was  principally  due to growth of $10,287,000 or 17% in average  earning loans.
Average total  securities and average federal funds sold declined  $1,745,000 or
9% and $260,000 or 6%,  respectively,  between the periods. The yield on average
earning assets remained  relatively  unchanged at 9.16% compared to 9.14% during
the 1996  period.  The yield was  enhanced by an increase in the  proportion  of
earning  assets  invested  in higher  yielding  loans,  76% for the 1997  period
compared to 71% for the 1996 period.

Average  interest-bearing  liabilities  increased  $6,337,000 or 11% between the
1997 and 1996 periods.  The average rate paid for  interest-bearing  liabilities
increased  to 4.28% for the 1997 period  compared to 4.08% for the 1996  period.
The higher  average  rate paid  during the 1996 period  principally  reflected a
shift in the deposit mix. The proportion of total  interest-bearing  liabilities
that  were  higher  cost  time  deposits  increased  to 59% for the 1997  period
compared to 53% for the 1996 period.

INTEREST  RATE  SENSITIVITY

Interest rate sensitivity is the relationship  between market interest rates and
net  interest  income  due  to  the  repricing  characteristics  of  assets  and
liabilities. If more assets than liabilities reprice in a given period (an asset
sensitive  position),  interest  rate changes will be reflected  more quickly in
rates on earning assets. If interest rates decline,  an asset sensitive position
could adversely affect net interest  income.  Alternatively,  where  liabilities
reprice  more  quickly  than  assets in a given  period (a  liability  sensitive
position) a decline in market  rates  could  benefit net  interest  income.  The
results would reverse if market rates were to increase.

The  following  table  presents the  Company's  interest  rate  sensitivity  gap
position at June 30, 1997.  For any given period,  the repricing is matched when
an equal amount of assets and liabilities reprice. The repricing of a fixed rate
asset or liability is  considered to occur at its  contractual  maturity or, for
those assets which are held for sale,  within the time period  during which sale
may  reasonably  be  expected  to  be  accomplished.  Floating  rate  assets  or
liabilities  are  considered  to reprice in the period during which the rate can
contractually  change.  Any excess of either assets or  liabilities  in a period
results in a gap, or  mismatch,  shown in the table.  A positive  gap  indicates
asset sensitivity and a negative gap indicates liability sensitivity.

<PAGE>
<TABLE>
<CAPTION>
                                              Interest Sensitivity Period
                                         ----------------------------------------     
                                               3       Over     Over 1        
As of June 30, 1997:                      months   3 months    year to     Over 5
(Dollars in thousands)                   or less  to 1 year    5 years      years      Total
--------------------------------------------------------------------------------------------
<S> 
Interest rate sensitive assets:
                                         <C>        <C>        <C>        <C>        <C>    
  Loans (net of nonaccrual)              $48,375    $ 3,624    $ 8,053    $11,602    $71,654
Securities (before unrealized loss on
  securities available for sale)           9,385      3,201      5,228      5,461     23,275
Federal funds sold                         1,500          0          0          0      1,500
--------------------------------------------------------------------------------------------
    Total                                 59,260      6,825     13,281     17,063     96,429
--------------------------------------------------------------------------------------------
Interest rate sensitive liabilities:
  Interest-bearing transaction accounts   18,096          0          0          0     18,096
  Savings deposits                         5,863          0          0          0      5,863
  Time deposits >$100,000                 18,347      3,867      1,018        100     23,332
  Other time deposits                      9,928      5,994      1,721          0     17,643
  Other borrowed funds                       136      1,594          0          0      1,730
--------------------------------------------------------------------------------------------
    Total                                 52,370     11,455      2,739        100     66,664
--------------------------------------------------------------------------------------------
Interest rate sensitivity gap           $  6,890    $(4,630)   $10,542    $16,963    $29,765
--------------------------------------------------------------------------------------------
Cumulative interest rate
  sensitivity gap                       $  6,890    $ 2,260    $12,802    $29,765
--------------------------------------------------------------------------------------------
Cumulative interest rate
 sensitivity gap to total assets            6.5%       2.1%      12.0%      27.9%
</TABLE>

This table  presents a static gap,  which is a position  at a point in time.  It
does not address the interest rate  sensitivity of assets or  liabilities  which
would be added through  growth,  nor does it anticipate the future interest rate
sensitivity of assets and  liabilities  once they have repriced,  and it assumes
equivalent  elasticity of assets and liabilities.  The interest rate sensitivity
analysis at June 30,  1997,  indicates  that the Company,  on a  cumulative  gap
basis, is asset sensitive over all the time periods.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The Company  provides for potential loan losses by a charge to operating  income
based  upon the  current  composition  of the loan  portfolio,  past  loan  loss
experience, current and projected economic conditions, an evaluation of the risk
elements in the loan portfolio and other factors that, in Management's judgment,
deserve  recognition in estimating loan losses. In addition,  various regulatory
agencies, as an integral part of their examination process,  periodically review
the Company's  allowance for loan losses.  Such agencies may require the Company
to make  additions to the allowance  based on their  evaluations  of information
available to them at the time of their  examination.  Management will charge off
loans to the allowance when it determines there has been a permanent  impairment
of the related carrying values.

The provision for loan losses  reflects an amount  sufficient to cover estimated
loan losses and to maintain the allowance  for loan losses at a level which,  in
Management's  opinion, is adequate to absorb potential credit losses inherent in
loans,  outstanding loan  commitments and standby letters of credit.
<PAGE>

As of June 30, 1997,  the allowance for loan losses was  $1,000,000  compared to
$971,000 at December 31,  1996.  The ratio of the  allowance  for loan losses to
total loans was 1.4% at June 30, 1997 and December 31, 1996. A $47,000 provision
for loan losses was added during the first six months of 1997 while no provision
for loan  losses  was  made  during  the  first  six  months  of 1996.  Although
Management  uses available  information  to provide for losses on loans,  future
additions  to the  allowance  may be  necessary  based on  changes  in  economic
conditions. Based upon information currently available, Management believes that
the  allowance  for loan losses at June 30,  1997 is  adequate to absorb  future
possible  losses.  However,  no assurance  can be given that the Company may not
sustain  charge-offs  which are in excess  of the size of the  allowance  in any
given period.

Information  on  nonperforming  loans and other  real  estate  owned for the six
months  ended June 30,  1997 and 1996 and the year ended  December  31,  1996 is
summarized in the following table.
<TABLE>
<CAPTION>
                                                   June 30,  December 31,  June 30, 1996
(Dollars in thousands)                                 1997          1996
-----------------------------------------------------------------------------------------
<S>                                                     <C>            <C>           <C>
Net loan charge-offs                                    $18            $11           $14

Ratio of net loan charge-offs to average loans            0              0             0

Nonperforming loans:
  Nonaccrual                                           $359           $208          $318
  Accruing loans past due
   90 days or more                                      223            227             0
-----------------------------------------------------------------------------------------
   Total nonperforming loans                           $582           $435          $318
-----------------------------------------------------------------------------------------

Ratio of nonperforming loans to total loans            0.8%           0.6%          0.5%
Ratio of allowance for loan losses to nonperforming
  loans                                                172%           223%          304%

Other Real Estate Owned                                   0              0          $359
</TABLE>

Although there has been an increase in total  nonperforming loans from June 1996
to June 1997, 62% of the June 1997 total represent loans guaranteed by the Small
Business Administration ("SBA loans"). The remaining unguaranteed  nonperforming
balance of $223,000  is  comprised  of loans in the  process of recovery  and/or
liquidation and represents a small 0.3% of total outstanding  loans.  Management
believes  that the  increase in  nonperforming  loans since June 30, 1996 is not
representative of any specific trend within the loan portfolio.

NONINTEREST INCOME

Total noninterest  income of $589,000 for the first six months of 1997 increased
$97,000 or 20% compared to the first six months of 1996. The greatest change was
a $118,000 or 160% increase in other noninterest income,  principally reflecting
a  nonrecurring  recovery in 1997 of $149,000 in loan  collection  expenses from
prior periods. Bankcard income also increased during the 1997 period, up $25,000
or 21% compared to the 1996 period,  due to increased merchant account activity.
<PAGE>

With the sale of a smaller  volume of SBA loans  during  the first six months of
1997,  the gain on sale of loans  declined  $51,000 or 47% compared to the first
six months of 1996. Loan servicing  income remained nearly  unchanged at $62,000
for the 1997  period  compared  to $65,000  for the 1996  period as the  average
volume of serviced loans did not change significantly.

NONINTEREST EXPENSE

Total  noninterest  expenses  of  $2,512,000  for the first  six  months of 1997
increased  $213,000 or 9% compared to the same period in 1996.  Contributing  to
the increase in noninterest  expenses was a $213,000 or 18% increase in salaries
and employee  benefits  principally  due to additional  staff for the Bank's San
Ramon branch,  which opened in the fourth quarter of 1996, and salary  increases
as well as increased benefits expenses. The Bank's San Ramon branch was also the
principal  reason for the $50,000 or 17%  increase in occupancy  expense.  Costs
associated with settlement of a litigation  matter in the second quarter of 1996
explain a large  portion  of the  $35,000 or 34% drop in  professional  services
expense and the $52,000 or 11% reduction in other noninterest expense.

PROVISION FOR INCOME TAXES

The  provision  for income tax expense was  $311,000 for the first six months of
1997 compared to $316,000 for the first six months of 1996. The effective income
tax  rate  was 37% and 39% for the 1997  and  1996  periods,  respectively.  The
decline in the rate for 1997 principally reflected the effects of an increase in
nontaxable  municipal  bond interest and a reduction in the  California tax rate
for financial institutions to 10.84%% for 1997 from 11.3% for 1996.

                  THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO
                        THREE MONTHS ENDED JUNE 30, 1996

OVERVIEW

Net income for the Company for the second quarter of 1997 was $343,000  compared
to $224,000 for the second  quarter of 1996.  Net income per share was $0.27 and
$0.19 for the 1997 and 1996 quarters, respectively.

The  $119,000 or 53% increase in net income  between the 1997 and 1996  quarters
principally resulted from increases of $165,000 or 72% in noninterest income and
$120,000 or 9% in net interest  income which were partially  offset by increases
of $61,000 or 5% in  noninterest  expense,  $58,000 or 42% in the  provision for
income taxes and $47,000 in provision for loan losses in the 1997 quarter.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net  interest  income of  $1,450,000  for the second  quarter of 1997  increased
$120,000 or 9% compared to the second quarter of 1996. The increase  principally
<PAGE>

reflected  $8,254,000  or 10%  growth in  average  earning  assets  between  the
quarters.  The net  interest  margin  declined  to 6.21% from 6.26% for the 1996
quarter.

The growth in average interest-earning assets between the 1997 and 1996 quarters
was  principally  due to an increase  of  $9,650,000  or 16% in average  earning
loans.  Average total securities  increased $241,000 or 1% while average federal
funds sold declined $1,637,000 or 26% between the quarters. The yield on average
earning  assets  rose to 9.19%  compared  to  9.11%  during  the  1996  quarter,
principally  reflecting  an  increase in the ratio of average  earning  loans to
average total earning assets.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

As a result of growth in loans held for investment, a $47,000 provision for loan
losses was added to the  reserve  for loan losses  during the 1997  quarter.  No
provision for loan losses was made during the second quarter of 1996.

NONINTEREST INCOME

Total  noninterest  income of $395,000 for the second  quarter of 1997 increased
$165,000 or 72% compared to the second quarter of 1996. The largest change was a
$134,000 or 406% increase in other noninterest  income,  principally  reflecting
the 1997 recovery of $149,000 of loan  collection  expenses from prior  periods.
Also  contributing  to higher  noninterest  income  for the 1997  quarter  was a
$16,000 or 25% increase in bankcard income and a $12,000 or 27% increase in gain
on sale of loans.

NONINTEREST EXPENSE

Total  noninterest  expenses  of  $1,260,000  for  the  second  quarter  of 1997
increased  $61,000 or 5%  compared  to the same  quarter in 1996.  Salaries  and
employees benefits increased $117,000 or 20% due principally to additional staff
for the Bank's San Ramon branch opened in December of 1996 and salary increases,
as well as increased  employee benefits expense.  Occupancy expense rose $22,000
or 15% for the 1997 quarter,  principally due to the new branch of the Bank, and
bankcard  expense rose $18,000 or 38% as a result of increased  merchant account
activity.  The  settlement of a litigation  matter in the second quarter of 1996
pushed expenses higher for that quarter in the areas of noninterest expenses and
professional services with the result that these expenses dropped $80,000 or 29%
and $24,000 or 42%, respectively, in the 1997 quarter.

PROVISION FOR INCOME TAXES

The provision for income tax expense was $195,000 for the second quarter of 1997
compared to $137,000 for the second  quarter of 1996.  The increased  income tax
expense  reflected higher taxable income during the 1997 quarter.  The effective
income  tax rate was 36% and 38% for the 1997 and 1996  quarters,  respectively.
The decreased rate for the 1997 quarter  principally  reflected an adjustment to
the projected tax rate for the entire year. 
<PAGE>

FINANCIAL CONDITION

LOANS AND INVESTMENTS

Loan  growth  slowed  during the first six months of 1997  compared  to the same
period in 1996.  Total loans of  $71,474,000 at June 30, 1997 were only $112,000
higher than at year-end  1996.  Deposit  growth for the first six months of 1997
was principally  invested in securities and federal funds sold, up by $8,679,000
or 54% from December 31, 1996.

DEPOSITS AND OTHER BORROWED FUNDS

Total deposits of $94,271,000 at June 30, 1997 increased $10,980,000 or 13% from
December 31, 1996.  The  increase in deposits  was  primarily  the result of new
account growth in the Bank's  recently  opened San Ramon Regional  Office and an
increase  in public  fund time  deposits.  Securities  sold under  agreement  to
repurchase and federal funds purchased  declined $574,000 or 25% and $500,000 or
100%, respectively, during the first six months of 1997.

OTHER ASSETS AND OTHER LIABILITIES

Interest and fees receivable decreased $21,000 or 4% during the first six months
of 1997.  Interest  payable and other  liabilities  at June 30,  1997,  declined
$361,000 or 29% from year-end 1996  principally  due to the payment in 1997 of a
cash dividend accrued in 1996.

LIQUIDITY

Liquidity  is defined as the ability of the  Company to meet  present and future
obligations  either through the sale or maturity of existing  assets,  or by the
acquisition  of funds  through  liability  management.  The Company  manages its
liquidity to provide  adequate funds to support both the borrowing  needs of its
customers and  fluctuations in deposit flows.  The Company defines liquid assets
to include cash and  noninterest-bearing  deposit balances,  federal funds sold,
all  marketable  securities  less  liabilities  that are  secured  by any of the
securities,  and loans held for sale, less any reserve requirements being met by
any of the above. Net deposits and short-term  liabilities include all deposits,
federal funds purchased, repurchase agreements and other borrowings and debt due
in one year or less. The liquidity  ratio is calculated by dividing total liquid
assets by net deposits and short term liabilities. The Company's liquidity ratio
by this measure was 30% at June 30, 1997 and 28% at December 31, 1996. It is the
opinion of Management that the Company's and the Bank's liquidity  positions are
sufficient to meet their respective needs.

In  addition,  the Bank  has  informal,  non-binding,  federal  funds  borrowing
arrangements  totaling  $5,000,000  with  a  correspondent  bank  and  also  has
repurchase  facilities  to meet  unforeseen  outflows.  As of June 30, 1997,  no
borrowed funds were  outstanding  from these credit  facilities.  As of June 30,
1997, the Bank did not carry any brokered deposit balances.
<PAGE>

CAPITAL

The following  tables  present the Company's and the Bank's  regulatory  capital
positions at June 30, 1997,  and average  assets over the six month period ended
June 30, 1997:
<TABLE>
<CAPTION>
                                             RISK BASED CAPITAL RATIO
                                              Company              Bank
(Dollars in thousands)                    Amount  Ratio       Amount   Ratio
--------------------------------------------------------------------------------
<S>                                      <C>      <C>         <C>      <C>  
Tier 1 Capital                           $ 9,958  11.5%       $ 9,776  11.3%
Tier 1 Capital minimum requirement         3,473   4.0          3,467   4.0
--------------------------------------------------------------------------------
Excess                                   $ 6,485   7.5%       $ 6,309   7.3%

Total Capital                            $10,958  12.6%       $10,776  12.4%
Total Capital minimum requirement          6,945   8.0          6,935   8.0
--------------------------------------------------------------------------------
Excess                                   $ 4,013   4.6%       $ 3,841   4.4%

Risk weighted assets                     $86,818              $86,687
</TABLE>
<TABLE>
<CAPTION>
                                                  LEVERAGE RATIO
                                             Company              Bank
(Dollars in thousands)                    Amount  Ratio       Amount   Ratio
--------------------------------------------------------------------------------
<S>                                      <C>       <C>        <C>       <C> 
Tier 1 Capital to average total assets   $ 9,958   9.8%       $ 9,776   9.6%
Range of minimum leverage                  3,046-  3.0-         3,042-  3.0-
  requirement                              5,076   5.0%         5,069   5.0%
--------------------------------------------------------------------------------
Range of excess                            4,882-  4.8-         4,707-  4.6-
                                         $ 6,912   6.8%       $ 6,734   6.6%

Average total assets                     $101,518             $101,387
</TABLE>

The  Company  currently  does not  have any  material  commitments  for  capital
expenditures,  and in the opinion of  Management,  the  Company's and the Bank's
capital positions are sufficient to meet their respective needs.

INFLATION

It is  Management's  opinion that the effects of  inflation on the  consolidated
financial  statements for the periods ended June 30, 1997 and 1996 have not been
material.

<PAGE>
                          PART II - OTHER INFORMATION


Item 4. Submission of Matter to a Vote of Security Holders.

     (a) The Company's Annual Meeting of Shareholders was held on June 3, 1997.

     (b) Not required.

     (c) At the 1997 Annual Meeting the shareholders took the following actions:

          1.   Elected  Directors  of the Company to serve until the 1998 Annual
               Meeting of  Shareholders  and until their  successors are elected
               and qualified;

          2.   Ratified  the  appointment  of  Deloitte  &  Touche  LLP  as  the
               Company's  independent  public  accountants  for the 1997  fiscal
               year.

          (i)  In the election of directors,  no candidates  were  nominated for
               election  as a director  other than the  nominees of the Board of
               Directors  whose  names  were set  forth in the  Company's  proxy
               statement  dated April 28, 1997.  Set forth below is a tabulation
               of the votes cast in the  election of  Directors  with respect to
               each nominee for office.
<TABLE>
<CAPTION>
                                       VOTES CAST FOR ELECTION   VOTES WITHHELD
<S>                                                  <C>               <C>   
                  Joshua Fong, O.D.                  840,778           52,322
                  William R. Henson                  840,778           52,322
                  Richard M. Kahler                  835,161           57,939
                  Dimitri V. Koroslev                840,778           52,322
                  William E. Peluso                  840,778           52,322
                  Oswald A. Rugaard                  840,778           52,322
                  Abstentions                            N/A              N/A
                  Broker non-votes                       N/A              N/A
</TABLE>

          (ii) On the matter of the  ratification of the appointment of Deloitte
               &  Touche  LLP as  independent  public  accountants  for the 1997
               fiscal year the votes cast were as follows:
<TABLE>
      
<S>                  <C>            <C>    
                     For            891,460
                     Against              0
                     Abstentions      1,640
                     Broker non-votes   N/A
</TABLE>
     (d) Not required.

Item 5. Other Information: None

Item 6. Exhibits and Reports on Form 8-K.

     (a) Exhibits: None.

     (b)  Reports on Form 8-K:  No reports on Form 8-K were filed by the Company
          for the quarter ended June 30, 1997.


<PAGE>


                             SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                BAY COMMERCIAL SERVICES
                                (Registrant)




Date:  August 4, 1997           /s/R. M. Kahler
                                ------------------------------
                                R. M. Kahler
                                President and
                                Chief Executive Officer
                                (Principal Executive Officer)



Date: August 4, 1997            /s/R. D. Greenfield
                                ------------------------------
                                R. D. Greenfield
                                Chief Financial Officer
                                (Principal Accounting Officer)